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Today I've been thinking about two arguments that, on the surface, have nothing to do with each other, but are actually two examples of the same fallacy at work.

Over at Ars Technica, I critique a recent analysis by Fred Campbell of the Google Fiber project in Kansas City. Campbell has argued that the Google Fiber project demonstrates that privately-financed broadband networks are possible if the government just gets out of the way. I pointed out that governments in KC have gone well beyond getting out of the way, spending taxpayer resources and imposing uncompensated costs on Kansas City residents to support the project.

Meanwhile, in the wake of this morning's dismal jobs numbers, David Freddoso quotes Paul Ryan arguing that "You can't expect the central bankers to bail us out all the time."

This statement is nonsense on several levels. The Fed's job is to provide the market with liquidity. When it expands the money supply during recessions, that isn't a bailout, that's just the system working the way it's supposed to. And, in point of fact, the Fed has an unlimited capacity to "bail us out," since they have the capacity to create an infinite number of dollars.

While these are very different issues, I think Campbell and Ryan have succumbed to the same intellectual trap. As free-market acolytes, they both approach economic issues by trying to identify government "intervention" in the economy and advocating that it be eliminated.

Most of the time, this approach works great. Take the shoe industry. The right government shoe policy is no policy: the shoe industry should be governed by the same general rules of property, contract, environmental and safety regulation, and so forth that govern every other industry. A National Shoe Policy would be a bad idea because decisions about how many and what kinds of shoes to produce are best left to the market.

But notice that this conclusion depends on the fact that the basic inputs to shoe production—leather and rubber, steel and bricks for the factory, and so on—are available for purchase in competitive markets. Government doesn't have to do anything special to create a hospitable environment for shoe production, which means that "don't intervene in the market" is a good rule of thumb for the shoe industry.

But this point is not valid for the broadband industry. One of the most important inputs to the production of broadband networks is rights of way—permission to dig up public streets and attach cables to public utility poles—which in most cases are under the control of local governments. That means that "don't intervene in the market" is a non-sensical position when it comes to broadband. Any decision the government makes about how its right of way will be used—refusing to let anyone dig up the streets, allowing everyone to dig up the streets, or any policy in between—is going to involve discretionary actions on the part of government officials.

Exactly the same point applies to monetary policy. Just as local governments hold a monopoly over the supply of rights of way, so the Fed holds a monopoly of the supply of currency. Any decision the Fed makes about the supply of currency—from supplying no new currency at all to supplying so much that it sparks hyperinflation—is in some sense a government intervention in the market.

In both cases, the government faces a trade-off between different kinds of intervention. In the broadband market, there's a trade-off between higher costs to residents and taxpayers on the one hand, and lower competition on the other. In the case of monetary policy, there's a trade-off between inflation and unemployment. When people try to shoehorn these issues into the free-market framework, what ends up happening is that one side of these trade-offs gets ignored. Advocates of "free-market" broadband policies tend to downplay the costs that network construction imposes on third parties. Advocates of "free market" monetary policy tend to ignore the fact that excessively tight monetary policy can deepen recession and throw thousands of people out of work.

It doesn't have to be like this. On less esoteric issues, free-market theorists tend to be more sensible. Take the case of roads. Nobody argues that the free-market position is for the government to stop fixing potholes. Everyone, left and right, understands that the government has a responsibility to maintain the roads it operates. That makes it possible to have a pragmatic discussion of the issue, weighing the costs and benefits of different policies for financing, building, and maintaining roads.

We ought to take the same pragmatic approach to debates over monetary policy and broadband policy. As long as the government controls the supply of a key resources, government "intervention" is inevitable. Framing things as a debate between free markets and big government just confuses the issue.